Chinese billionaire's $71m bid for NZ farm rejected

NEW Zealand Government ministers Paula Bennett and Louise Upston have turned down a $71 million bid by Chinese billionaire Jiang Zhaobai's flagship firm to buy the Lochinver Station.

The ministers are expected to announce their move publicly in the near future. Bennett is the Associate Finance Minister and Upston the Minister of Land Information.

Because the farm near Taupo was set to change to foreign ownership, the application to the Overseas Investment Office (OIO) for approval had to show that the new owner could add more value to the assets than a hypothetical local buyer.

It is understood the ministers have rejected the application on this issue.

During the election campaign, the planned sale of Lochinver to interests led by the Shanghai Pengxin company reignited concerns about foreigners buying NZ farms.

The OIO referred its recommendation on the Lochinver proposal - which was made via wholly owned Pengxin subsidiary Pure 100 Farm - to the two ministers just before Easter.

The process was complicated by a significant rearrangement of Pengxin-related corporate structures which would ultimately have resulted in Hunan Dakang Pastoral Farming being the ownership vehicle for all the Chinese firm's New Zealand farming interests.

While the Lochinver application was made under the Pure 100 umbrella, the ultimate aim was for Dakang to acquire it along with other Pengxin assets such as the 16 former Crafar farms, which were bought in 2012, and other farms waiting OIO approval. As a result, the OIO also had to ensure the other directors and shareholders in Dakang passed a good character test.

The Stevenson Group, which was set to sell the 13,843ha station to the Chinese, had extended the deadline for the deal a number of times. It wanted to complete the sale to free up capital to reinvest in other businesses, such as expanding its quarry in Drury and investing in a West Coast coal mine.

Earlier this year, NZ-China Trade Association chairman Martin Thomson spoke of the benefits of direct investment by China. "Investment tends to follow trade, and more trade still results from direct investment. New Zealand's largest foreign investor is Australia, which was also our first free-trade partner.

"It stands to reason, then, that China - which is now number one or two trade partner - will invest more and more in New Zealand."

Earlier this year, another Pengxin-controlled company - Milk NZ Holding - was named supreme winner at the 2015 HSBC NZCTA New Zealand China Business Awards replicating its success at the BNZ NZ China Business Awards.

New Zealand China Trade Association Chairman Martin Thomson said the winner proved the benefits of direct investment by China in New Zealand.

"Investment tends to follow trade, and more trade still results from direct investment," Thomson said. "New Zealand's largest foreign investor is Australia, which was also our first free trade partner.

"It stands to reason, then, that China - which is now our number one or two trade partner, will invest more and more in New Zealand. On the basis of Milk New Zealand Holding further investment is a good thing."

Milk NZ is owned by Shanghai Pengxin, the investor in Crafar Farms.

The company has turned around Crafar's less productive farms, using New Zealand management, labour and skills, and creating jobs in the process, Thomson said.

"Chinese investment has created New Zealand opportunity, at the same time providing a Chinese company with returns."